Subject: IUMI's comments
Dear Mr Rosag -
referring to your fax dated 5th July, here some comments from a IUMI perspective on the terrorism issue.
IUMI still feels that IMO ought to find a way to define terrorism. We of course realize that this task would be onerous and thankless and the road to a finally acceptable (consensus) definition paved with huge cobblestones. We, however, would like to point out that for insurance purposes such a definition already exists, is widely accepted and used by many parties. IUMI also feels that the argument of having to re-visit many already existing or even ratified conventions should not deter IMO from undertaking this task - after all many of these conventions came into force long before terrorism changed the landscape of risk for ever.
Now to some of the proposed options
hull and liability insurance in respect
of ships is a very international business. Big fleets are not quoted by only
one market but by several and also liability issues are spread over several
markets, the IGP consisting not only of
Licensing: most insurers are licensed by their supervisory authority. There is no need to create another, a new, body - such a proposal would probably not be able to find a majority.
Option B/Option D
intentionally, IUMI would like to comment on the
above options together as they appear to have some similarities. It is true
that even the most eager anti-trust/consumer protectionist government official
would see that in order to put together the necessary huge capacities, a
pooling arrangement might be necessary and it would appear indeed that the new
European legislation would expressly allow for such possibilities. A fact,
however, is that the times of establishing 'mandatory' schemes are way past and
we cannot see a resurgence of this kind of government interventions. There are
precedents on insurance/re-insurance schemes in the
Needless to say that in order to properly function, these options would have to be able to work with an acceptable definition of what is terrorism (see above) and it is difficult to see how definitions which do not match completely would not create considerable problems.
Option C - wholly caused
We would start trodding on thin ice here as the insurance industry, for centuries, is used to work with the concept of 'proximately caused'. As you say, 'wholly caused' would need to be defined very carefully, and we are not sure whether that will be a feasible alternative.
We do realize that we are here a bit at odds with the probable outcome of the work of the majority of the Correspondence Group but IUMI is wary of introducing unproven and untested concepts in situations which are - unfortunately - not theoretical at all and may well become reality.
Desirability of excluding terrorism
Whilst IUMI agrees that terrorism is considered in conjunction with war perils and in some instruments of cover receives the same considerations, we have to recognise that marine property insurers (hull and machinery insurers) consider war and of course terrorism too as coverable, do cover it but reserve their right to fix more onerous insurance conditions for war and/or terrorism as the actual situation may warrant or to exclude these risks alltogether.
It again has to be pointed out that before a peril such as terrorism can be excluded from coverage, it first has to be defined.
marine liability insurers exclude liability for war and it would be logical to also exclude liability for terrorism, especially if the shipowner complies with his 'duty of care' (ISPS etc.) - we would there lean very much towards the opinion expressed in ICC's paper dated 22nd June.
Unfortunately the undersigned will be unable to take part in LEG 89. Tony Nunn, however, will represent IUMI. He receives a copy of this message and is quite keen to defend the insurers' viewpoints.
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